Following the victory of Andrés Manuel López Obrador (AMLO) in Sunday's Mexican presidential election,
Will Scargill, Senior Oil and Gas Analyst at GlobalData, a leading data and analytics company, offers his view on the impact on the upstream sector:
“AMLO has been a fierce critic of the 2014 energy reform, but his tone has moderated somewhat in the run-up to the elections. It is now unclear whether he will hold a referendum on reversing the reforms, as previously promised, but it is likely that the pace and scale of new licensing will be reined in.
“The president-elect has stated that he will ask outgoing president Peña Nieto to halt the two onshore bid rounds planned for September, before his term starts on December 1st. Once in office he may limit the new opportunities available to investors, seeking to maintain the dominance of Pemex in its onshore and shallow-water heartlands or tighten the terms for new contracts in favour of the state. However, he has stated that a proposed review of existing contracts will be to check for potential corruption and investment protection provisions will limit his ability to roll-back licensing.
“After nine bid rounds the Mexican upstream landscape looks very different, with a variety of companies from major IOCs to small independents holding acreage. However, production is still declining and the outgoing government overpromised on the timeline for the reforms to have an impact on the output. We expect that the first new field development resulting from the process will start production in 2019. The sector may in fact see the fruits of Peña Nieto's reforms during AMLO's tenure as work progresses in existing contracts, even if new licensing slows.”